TMI Blog2016 (4) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... with some general observations. Only because the assessee before the Tribunal had accepted her liability for deduction of tax at source, cannot be the sole basis for imposition of penalty completely ignoring the primary and fundamental reason shown by the assessee for failure to deduct such tax. Proceedings under sections 201 and 271C, are two independent and separate proceedings. While imposing penalty, the authority concerned is duty bound to examine assessee’s explanation to find out whether there was reasonable cause for failure to deduct tax at source. As is evident, the assessee being advised by a professional well acquainted with provisions of the Act had not deducted tax at source. Therefore, no malafide intention can be imputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in default under section 201(1) of the Act. As stated, in response to the said letter, it was submitted by the assessee, not only the payment was made outside India but also for services rendered outside India. Hence, the provision of section 195 is not applicable. It was further submitted, the payment made was not towards reimbursement of expenses but for maintenance of website and other allied services rendered to the assessee. The Assessing Officer, however, did not find merit in the submissions of the assessee. He was of the view that the person to whom the payment was made by the assessee was not actually a service provider but a website designer. Thus, Ms. Simone Sheffield, gets commission for designing the contents of the website of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to a non resident for the services rendered outside India do not attract provisions of section 195. It was also submitted, reasons for entertaining such belief was due to the certificate issued by the Chartered Accountant stating that remittance is exempt from withholding tax at source. The Assessing Officer, after considering the submissions of the assessee and facts on record, found that the assessee before the Tribunal had accepted that she was required to deduct tax at source. Therefore, taking into consideration such admission of the assessee Assessing Officer held that her explanation that due to a bonafide belief she failed to deduct tax at source is not acceptable. The Assessing Officer observed, once the assessee had accepted her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the non resident. He submitted, that being the case there is a reasonable cause for not deducting tax at source, hence, no penalty is required to be levied. He submitted as proceedings under section 201 and 271C are two separate proceedings, merely because assessee was held liable to deduct tax under section 201, it will automatically not lead to imposition of penalty under section 271C. Learned Authorised Representative submitted, even otherwise also, the penalty order passed is barred by limitation as it is not within the time prescribed under section 275(1) of the Act. Learned Authorised Representative submitted, the order in second appeal was passed by the Tribunal on 3rd May 2012, and was served on the defendant On 13th June 2012, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who fails to deduct tax at source, shall be liable to pay by way of penalty a sum equal to the amount of tax which he has failed to deduct. However, imposition of penalty under section 271C is subject to the condition imposed under section 273B. A reading of section 273B of the Act suggests that where the assessee proves that the failure to deduct tax was for a reasonable cause, no penalty can be imposed. Therefore, from the conjoint reading of section 271C and 273B, it is clearly evident that imposition of penalty under section 271C is neither automatic nor mandatory. The authority concerned is empowered under section 273B not to impose penalty in a deserving case if he is satisfied that there was reasonable cause for failure to comply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax at source on the remittances made. Though, this fact was brought to the notice of the Departmental Authorities in course of the penalty proceedings but due weightage has not been given to such contention of the assessee. In our view, the explanation submitted by the assessee is a valid explanation and cannot be brushed aside with some general observations. Only because the assessee before the Tribunal had accepted her liability for deduction of tax at source, cannot be the sole basis for imposition of penalty completely ignoring the primary and fundamental reason shown by the assessee for failure to deduct such tax. Proceedings under sections 201 and 271C, are two independent and separate proceedings. While imposing penalty, the author ..... X X X X Extracts X X X X X X X X Extracts X X X X
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